Calls for more oversight of tax office amid criticism of its tactics

By Adele Ferguson, Nassim Khadem & Lesley Robinson

6 April 2018 — 5:07pm

The Australian Taxation Office uses heavy-handed tactics to target small businesses, and one of its deputy commissioners admits the powerful institution sometimes makes mistakes.

A joint Age/Sydney Morning Herald/Four Corners investigation can reveal that the tax office can get it wrong in one in 20 tax cases – often with huge financial impacts to the small businesses and taxpayers involved.

The ATO's watchdog, the Inspector-General of Taxation Ali Noroozi, has about 30 staff and his powers aren’t binding. It has prompted calls for more oversight and transparency to bring Australia into line with countries such as the US, Britain and Canada.

Mr Noroozi told the investigation: “I think it's perhaps in 5 per cent of the cases or so, an organisation that size may not get it right.”

Inspector-General of Taxation Ali Noroozi has been calling for more oversight of the ATO.Credit:Jessica Hromas

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Barrister Graeme Halperin described the ATO's powers as "extraordinary" and said murderers have more rights than taxpayers.

“People are brought up to believe that they have the presumption of innocence, that they have the right to remain silent, if they’re questioned by the authorities, and that their assets can’t be confiscated," Mr Halperin said. "Now in the world of tax, none of those things are true."

Mr Noroozi has been calling for more oversight of the ATO since he took the job in late 2008, including splitting the ATO's policing and regulatory functions under a separate commissioner and ensuring that small businesses get a fresh set of eyes when they dispute tax office assessments.

Currently only large companies with revenue of more than $250 million get an independent review and the ATO says the service will not be extended to small business and individuals due to resourcing limitations.

ATO Deputy Commissioner Deborah Jenkins admitted that the ATO does make mistakes but said Mr Noroozi’s 5 per cent figure may be too high.

She said the ATO – which has 20,000 staff and an operating budget of about $3.5 billion each year – was going through “a continuous process of learning how can we make sure the processes are currently working” and rejected calls for greater oversight.

“We have got enough scrutiny of the work that we’re currently doing,” she said.

ATO Commissioner Chris Jordan wrote to staff after the ATO conducted a raid of an ATO whistleblower who is speaking exclusively to the joint media investigation.

Mr Jordan, who declined to be interviewed in response to the joint media investigation, told staff that the ATO "regularly receive extremely positive feedback from credible sources – like small businesses themselves, and their representatives" and that the agency "will take the appropriate steps next week to ensure the community conversation is balanced, and that we can uphold and protect the strong reputation of the ATO and our people".

In the message, Mr Jordan told staff not to speak to the media.

Kathryn Little knows first-hand how frightening and powerful the ATO can be. On September 11, 2017, the tax office called her and essentially took away her ability to make a living by cancelling her Australian Business Number (ABN).

Kathryn Little, a contractor, had her ABN suddenly cancelled by the ATO.

She is one of a number of contractors working in the gig economy who had her life turned upside down.

The contractors' ABNs were cancelled because of an association with Adelaide-based transcription business OutScribe, which was in the ATO’s sights after being told in May last year its business model was being audited.

The ATO hadn’t finished its own business audit process when it cancelled these ABNs, triggering this crisis. After intense lobbying over a three-month period it agreed to reinstate the ABNs until it concluded its review.